Now available for download from Centre for Research on Socio-Cultural Change (University of Manchester):

The Eurozone crisis presents as a confusing series of events which have two dominant interpretations: either the crisis is caused by the profligacy of South European governments or the crisis is symptom of a North/South divide in terms of trade imbalances and competitiveness.

This paper presents a third account which focusses on problems arising from the character of banking and finance whose balance sheet interconnects and velocity through rehypothecation threaten sudden collapse.

This political-cultural analysis is developed by analogy and disanalogy with an aircraft crash in October 1963 when a BAC 1-11 prototype crashed disastrously because the new T tail design configuration led to a “deep stall” which the pilot could not recover.

In present day finance, control will fail unpredictably in event of major disturbance and there is no realistic prospect of engineering redesign as with the 1-11 after the crash. More seriously, private and social interests do not coincide in finance, as they do when passenger aircraft fall out of the sky.

In our After the Great Complacence analysis of the Wall Street and London crisis 2008-10, we focused on the policy elites which would not restrain finance before the crisis and could not radically reform it afterwards. We would now add that in the Eurozone crisis since 2010, there is an alarming gap between the interventions technically necessary to stabilise finance and what is currently politically possible; the reform agenda must therefore include political reforms which redistribute knowledges and rework institutions.